Technical indicators are a tool whose value is derived from the underlying value of a stock or asset. These tools try to foretell the longer-term price ranges or just the overall price action. Therefore, they try to predict the future by taking a look at the prior patterns. Examples of indicators are the Relative Strength Index, Money Flow Index, Stochastics, MACD, and Bollinger Bands.
What is the definition of technical indicators
As per different schools of thought, technical indicators are a sequence of knowledge factors. These factors can be derived by making use of a formula for the price of the stock or index. Price information contains mainly the open, high, low, or closes over a time period. Some indicators use only the closing price, whereas others include volume and open interest in their formulas. The associated price information is entered into the formula and technical information is produced.
As an example, the average of three closing prices of a stock (41 + 42 + 43) / 3 = 42.33 ). This is the average of the past 3 days. But if we continuously calculate the average of the past 3 days, the oldest data gets replaced by new data. In this way, we can create moving averages. For technical analysis reasons, technical indicators are frequently used in graphs or charts above or below a stock’s price chart.
Example of technical indicators in Indian charting platforms
On Zerodha Kite
Zerodha has a very fluid and user-friendly trading platform named Zerodha Kite. Kite is a platform for web trading as well as trading through Android enabled mobile smartphones. It is equipped with all popular technical indicators to facilitate trading and enable traders to trade better allowing leeway for maximum winning trades. The list of Zerodha Kite Indicators is detailed below. All the following indicators are equipped with customizable parameters to suit the individual requirement of traders besides having default values.
List of technical indicators on Zerodha Kite
- ADX/DMS
- ATR Bands
- ATR Trailing Stops
- Accumulation/Distribution
- Accumulative Swing Index
- Alligator
- Aroon
- Aroon Oscillator
- Average True Range
- Awesome Oscillator
- Bollinger %b
- Bollinger Bands
- Balance of Power
- Bollinger Bandwidth
- Center Of Gravity
- Chaikin Money Flow
- Chaikin Volatility
- Chande Forecast Oscillator
- Chande Momentum Oscillator
- Choppiness Index
- Commodity Channel Index
- Coppock Curve
- Correlation Coefficient
- Darvas Box
- Detrended Price Oscillator
- Disparity Index
- Donchian Channel
- Donchian Width
- Ease of Movement
- Elder Force Index
- Ehler Fisher Transform
- Elder Impulse System
- Elder Ray Index
- Fractal Chaos Bands
- Fractal Chaos Oscillator
- Gator Oscillator
- Gopalakrishnan Range Index
- High Low Bands
- High Minus Low
- Highest High Value
- Historical Volatility
- Ichimoku Clouds
- Intraday Momentum Index
- Keltner Channel
- Klinger Volume Oscillator
- Linear Reg Forecast
- Linear Reg Intercept
- Lowest Low Value
- Linear Reg R2
- Linear Reg Slope
- MACD
- Market Facilitation Index
- Mass Index
- Median Price
- Momentum Indicator
- Moving Average
- Money Flow Index
- Moving Average Deviation
- Moving Average Envelope
- Negative Volume Index
- On Balance Volume
- Parabolic SAR
- Pivot Points
- Positive Volume Index
- Price Momentum Oscillator
- Price Oscillator
- Pretty Good Oscillator
- Price Rate of Change
- Price Volume Trend
- Prime Number Bands
- Prime Number Oscillator
- Pring’s Know Sure Thing
- Pring’s Special K
- Psychological Line
- QStick
- RAVI
- RSI
- Rainbow Moving Average
- Rainbow Oscillator
- Random Walk Index
- Relative Vigor Index
- Relative Volatility
- STARC Bands
- Schaff Trend Cycle
- Shinohara Intensity Ratio
- Standard Deviation
- Stochastic Momentum Index
- Stochastics
- Supertrend
- Swing Index
- TRIX
- Time Series Forecast
- Trade Volume Index
- Trend Intensity Index
- True Range
- Twiggs Money Flow
- Typical Price
- Ulcer Index
- Ultimate Oscillator
- Volume Chart
- Volume Oscillator
- VWAP
- Volume Profile
- Volume Rate of Change
- Vertical Horizontal Filter
- Volume Underlay
- Vortex Indicator
- Weighted Close
- Williams %R
- ZigZag
Other brokers like Upstox also have these indicators in their trading platform Upstox Pro. Other stockbrokers are also upgrading their trading terminals to include better charts for better analysis.
Types of technical indicators
There are 2 types of technical indicators. Leading and lagging indicators. Let us check how to distinguish between these 2 types.
Leading indicators
Leading indicators try to lead the price action. Therefore, they are predictive in nature, which means they try to predict future price action. An example of a leading indicator is RSI. If the RSI tops it is called the market is overbought. That is an indication that the market can correct from there. Though it is not a sure thing, but many times price corrects from there. Therefore, RSI leads the price and is a leading indicator.
Lagging Indicators
The lagging indicators lag the price action. In this case price leads and the indicators follow the price. Suppose a moving average. The price moves and the moving average moves according to the price. The lagging indicator can give a late signal but many times their signals are more accurate.
Technical indicators PDF ebook
We’re sharing a FREE e-book on basic technical indicators. You may download the FREE e-book by clicking the download link here.
Conclusion
Traders need technical indicators to analyze the market. These indicators provide trading direction to the traders. Some indicators are leading and some are lagging. Nowadays indicators are available in all major stockbroking platforms. So traders do not need to purchase cost charting software like AmiBroker extra.